Amul CantillonTo solve the Cantillon, it is essential to identify the Landlords and Laborers in the given case. Also, the necessities and the luxuries need to be identified or assumed on the basis of the information. Since Mr. Shah owns the cows and other landowners have land to set up a production unit as well as the store to sell its products, hence it is safe to conclude that these two are the owners of the factors of production. Ms. Mittal, who works in the AMUL store, is a laborer. It can be safely assumed that Mr. Shah also owns labor to milk his cows. Owing to the lack of data, milk is assumed to be a necessities and cold coffee, chocolate milkshake and tub of ice-cream are assumed to luxuries.
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1.
A.
According to Mr. Mazur, who is an authority on the issue, “the issue of farm labor in India can still be a contentious one without any real debate about what are the exact issues. Since agricultural labor is considered an absolute necessity in the State of West Bengal, it is not surprising that other questions are put forward regarding it as well. I would like to point out that there is not only no consensus, either among the farmers as well as the farmers themselves, about whether ‘farm labor’ includes the basic necessities such as the care of the cattle; instead it is that there are some instances where these need to be addressed and some where others do not.
B.
For one thing, there is some talk that the cows in India will be forced to work, which is very doubtful. The issue thus far for farmers is a “fitness or value issue”. Moreover, what is certain is that the cows there, who are not trained or required to perform the job, will end up working on their own.” When I met Mr. Mazur last August, he was in a hurry of his own and in one of his rooms used the table to ask “Do cows require food for living?” The farmer in question, when asked, answered “Yes, we do.” We therefore do, I believe, in the fact that it also behooves us to give the farmer sufficient food, which indeed he usually would.
The fact is, however, that these farm workers, who do not have specific need to provide for their family members, are not required to work in agriculture. All farmers should do is to go out and produce the necessary commodities for their family members to take care of themselves. In terms of the various issues under discussion, it is more accurate to say that there is no consensus. Some farm workers in India find other means to do the farming work. In fact, it seems to me as we go, this is not unusual. For instance, when it comes to working on cattle, these farmers are constantly asking themselves whether they should farm on their own (or under their own control) or when they should not. In terms of their own circumstances, the farmer is very often the one who is more or less likely to leave the farm or go out and work for hire. The farmer may also go out and carry all the necessary tools for the project (such as the mending, drying etc.) and take care of some of the other crops which may or may not be able to be purchased. It seems, also, that many of those who are forced to find work are also poor
The cantillon diagram shows the flow of resources. Mr. Shah supplies milk to AMUL for Rs. 500. Out of this Rs. 500, Mr. Shah pays a remuneration of Rs. 150 to the labor for mulching his cows. The remaining Rs. 350 is spent by him on the luxuries that he buys. The labor uses his Rs. 150 to buy the necessities (milk) from the AMUL store. AMUL uses this money for making factor payments i.e. wages, rent, interests etc. These payments enable the landlords and laborers to purchase the desired luxuries and necessities. The flow continues henceforth.
Solving Cantillon:Rent earned through production of necessities (tTN) = 50Rent earned through production of luxuries (tTU) = 200Wage Rate of labor producing luxuries (wLU) = 50Wage Rate of labor producing necessities (wLN) =100Total revenue is the price of the commodity multiplied by the amount produced. Total cost is the wages and rents paid to the labor and land employed in the production of the goods.
pNXN = wLN + tTN= 100 + 50